High interest rates equal high Pennsylvania lottery jackpots
By Anthony Hennen | The Center Square
HARRISBURG, PA — The Pennsylvania lottery has had unexpectedly large jackpots in the last fiscal year, but whether those wins are a sign of a new pattern or a peak before a fall, isn’t yet known.
The Independent Fiscal Office, in a recent analysis, points to high interest rates driving the build-up.
“Higher interest rates increase advertised jackpots, which promote more play that enhances jackpot pools and state revenue from the games,” the IFO noted. “With elevated interest rates expected into FY 2023-24, unusually large, advertised jackpots could continue in the near term.”
For the current 2022-23 fiscal year, the Mega Millions and Powerball lotteries are expected to generate $559 million in ticket sales, the IFO noted — a 56% growth from a year ago. Those two games comprise 10% of all lottery ticket sales, and Pennsylvania keeps 50% of the ticket sales ($279 million in revenue for 2022-23).
The gross sales of both games beat recent records; Mega Millions has had $244 million in gross sales for 2022-23, which surpasses its 2018-19 record of $230 million. Powerball’s $315 million in gross sales beat out $273 million in 2017-18.
Those high sales of the recent past, however, weren’t sustained. Rule changes that drove sales in those years were followed by significant declines in sales. A change in the interest rate could have a similar effect in the near future. Jackpot winners get 30 payments over 29 years, and those totals change with interest rates.
“If interest rates decline, then the average advertised jackpot will likely grow more slowly, and this slowdown could impact sales and ultimately state revenue,” the IFO noted.
Jackpots that Pennsylvanians can win also fluctuate thanks to interest rates. Had interest rates not boosted the advertised value to cash value ratio, the $3.7 billion Mega Millions jackpot in 2022-23 would have been $863 million less and the $3.5 billion Powerball would have been $1 billion less.
“It is unclear whether these games can maintain their strong gains, or if this year’s rapid growth was a statistical anomaly,” the IFO noted.
